According to a new report from the International Energy Agency, spending on clean energy transitions must accelerate much faster to meet climate targets due to Covid-19.
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Global investments in the electricity sector are expected to increase by around 5% in 2021 to reach more than $820 billion, their highest level ever, after remaining stable in 2020. Renewables dominate investment in power plants; new power generation capacity and are expected to account for 70% of the total this year.
That money is now going further than ever in financing clean electricity, with a dollar spent today on deploying solar PV, resulting in four times more electricity than ten years ago, thanks to significantly improved technology and lower costs.
For Fatih Birol, Executive Director of the IEA, "The rebound in energy investments is a welcome sign, and I am encouraged to see more investments moving towards renewable energies."
For him, more resources must be mobilised and directed towards clean energy technologies to put the world on the right track to achieve net-zero emissions by 2050. Based on our new Net Zero roadmap, investments in clean energies will have to triple by 2030.
While renewables dominate new investments in electricity and approvals for coal-fired power plants are 80% lower than they were five years ago, coal is no slouch. There was even a slight increase in the green light for coal-fired power plants in 2020, led by China and other Asian economies.
As for investments in the upstream oil and gas sectors, they are expected to increase by around 10% in 2021 as companies recover financially from the 2020 shock, but their spending remains well below pre-crisis levels. The new report highlights the divergent strategies between different oil and gas companies. The majors are keeping oil and gas spending at the same level in 2021, despite the price recovery. Meanwhile, some national oil companies are stepping up their investments, raising the possibility of an increase in market share if demand continues to grow.
The latest data shows that the spending of some global oil and gas companies is starting to diversify. Last year, the IEA analysis found that only about 1% of industry capital spending went to clean energy investments. But project tracking to date in 2021 suggests it could reach 4% this year for the industry as a whole and well above 10% for some of Europe's top companies.
The report is available here.
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